 |
| Thousands protest ruinous inflation in Prague, Czech Republic, Sept. 28, one of several actions around the world demanding relief from the crushing impact of unfolding capitalist crisis. Source: Reuters/David W Cerny; Caption: The Militant |
I typically commend my friend and former comrade Brian Williams for his economics coverage. He's among the very few on my Beat who actually knows something about the subject and who makes some effort to report it honestly. But I gotta say, his latest article, published in The Militant and entitled Soaring prices wreak havoc on working people worldwide, disappoints. It's not really about economics, and instead it's boilerplate propaganda that's not worth reading. That said, it's a slow week in Trotsky-Land and so here we are.
Trotskyists--and Mr. Williams is no exception--are against inflation. In this they agree with 99.5% of the global public, which makes them boringly mainstream. He writes,
Rising prices are wreaking havoc with the lives of working people and our families worldwide. Inflation reduces the value of our wages as we confront higher costs for food, fuel, housing and other essentials, and rising debts. ...
Sizable protests against these assaults have been held in many countries. In France thousands joined protests in dozens of cities Sept. 29 during a one-day walkout called by the CGT union federation. They denounced rising food prices and moves by French President Emmanuel Macron to raise the retirement age from 62 to 64 or 65. “Increase our salaries, not the age of retirement,” Metro conductor Ludovic Le Ny, told the Wall Street Journal in Paris.
Demonstrating against inflation is rather like demonstrating against earthquakes--it's under no one's control. Inflation arises when the supply of money exceeds the demand for money, which means the value of money goes down (i.e., things cost more). The supply of money is imperfectly regulated by central banks (in the US the Federal Reserve Bank), but even they can't control it with any precision. The demand for money depends on no central authority, but rather on collective consumer behavior. Nobody can control that, not even the Marxist despots in Cuba, Venezuela, North Korea or China.
So it's not clear to me what the protesters pictured above expect to accomplish. They're wasting their time.
What astonishes me is that Mr. Williams thinks our primary problem is inflation. Trotskyists--of all people--surely should be able to identify the root of our difficulty: our standard of living is declining. Inflation is not causing this, but does result in part from efforts by governments to make people feel richer by giving them extra money. In the US this has come in the form of "stimulus checks" and "student loan forgiveness." But extra money doesn't make people richer--it just raises prices.
Why is our standard of living going down?
There is one big reason and several smaller contributing reasons. Let's consider the small stuff first.
The Ukraine war and accompanying sanctions on Russia have taken a big chunk of global energy supply off the market. This has a dramatic effect on Europe--and will definitely lower their standard of living until the supply can somehow be replaced.
Likewise, the war has reduced global food production and distribution. Together, Russia and Ukraine were the world's leading wheat exporters. This hugely disrupts the food supply in the Middle East and will likely lead to famine. Egypt--which now grows cotton as a successful cash crop--will have to abandon that to grow its own food. Egyptians will be getting a lot poorer.
The US has a serious labor shortage, caused by the retirement of the baby boomers, sharply declining birth rates and declining immigration, and increased social dysfunction such as drug abuse. The result is increased wages and stronger unions (arguably good things), but also serious shortages of healthcare workers, airline personnel, and skilled trades. Many small businesses are being forced to close.
Mr. Williams obviously doesn't understand this. He writes
A large number of newly created jobs are at low pay, forcing an increasing number of workers to take on a second or even a third job to make ends meet. At the same time, bosses are hiring part-time workers with few if any benefits, and pushing speedup, as part of their drive to defend their profits and to weaken our unions.
This is not true. Starting wages for low-skilled labor is now over $20/hour in many parts of the country. Companies like Starbucks are belatedly realizing that they're going to have to treat their employees a whole lot better.
But the big problem--the one that Mr. Williams barely mentions--is the demise of China. George Friedman explains it very clearly. While I believe this video was recorded some years ago as a prediction, it is a prediction that is now coming true.
China is bankrupt. Twenty percent of the world's productive economy is now going out of business.
The ramifications are global--and huge.
- The US used to import lots of stuff from China. That's not happening any more--our manufacturing is being repatriated. (A huge new chip manufacturing facility is opening near Albany, NY). It will take some years for our supply chain to readjust, and there will be an additional strain on our labor supply, but within five years Americans won't even know that China is missing.
- While the US was China's biggest customer (by far), Germany was China's biggest supplier. To manufacture all that stuff, China needed machines and machine tools--most of which were imported from Germany. That market has disappeared--China ain't importing nothing. For the first time in decades Germany is running a trade deficit. The German standard of living is declining not just because of energy, but because there is no market for their products. Basically, Germany (and the EU) is screwed.
- Many Third World countries are in the same boat as Germany. Mr. Williams mentions South Africa. South Africa's leading exports are gold, platinum, cars, iron products, coal, manganese, diamonds. Diamonds may be a girl's best friend, but a lot of those girls live in China--and they're not buying diamonds any more. Gold is also a luxury product for which the Chinese market no longer exists. I'll suggest that (apart from cars) the other items on the export list were headed to China. Indeed, China was South Africa's largest export market--and it's gone. South Africa is just as screwed as Germany--there is no ready substitute market for its exports.
No comments:
Post a Comment